EFA Funding Guidance for Young People 2012/13 ILR Funding Returns - published June 2012

1. EFA Funding Guidance for Young People 2012/13 ILR Funding Returns - published June 2012 (separate presentations are also available on Funding Guidance and Learner Eligibility Guidance (LEG) EFA Funding Implementation Team (Young People)

2. ILR Funding ReturnsVersion 1 published in June 2012 2

3. Deadline for Returns 3

4. Explanatory Annexes in the Guidance 4

5. Annex A – Purpose of Final Claim 5 • Annex A of the Guidance provides Guidance for completing the 2012/13 ILR Funding Claim. • This includes: • Any calculation of funding; and • Any relevant authorised manual adjustment. • Purpose of Final Claim • The purpose of the claim is to provide the EFA with an assurance statement by the • relevant accounting officer over the regularity of the provider’s funding claim and ILR • data returns. This also enables the EFA and the provider to have an agreed final out- • turn that enables comparison of out-turn to allocation on a provider, regional and • national basis. The final claim will also determine for all providers whether any funds • paid for 2012/13 will be adjusted for retrospective clawback adjustments. The EFA • expects the overall total of cash claimed to be consistent with any financial provision • being made by the provider in its financial statements.

6. Final Claim Signature 6 The principal or head of the institution should sign all final claim forms. In the case of higher education (HE) institutions, the person with equivalent responsibility for further education (FE) in the institution should sign the final claim forms. Providers and funding auditors are reminded that the final claim forms returned by the funding auditor to the EFA should contain an original signature, not a photocopy or facsimile. The principal or head of the institution is required to certify that, to the best of his or her knowledge, the funding claimed has been calculated from data correctly extracted from the institution’s records, which accurately reflect enrolments during 2012/13, in accordance with the guidance and definitions set out in the various documents that make up Funding Guidance 2012/13 and other relevant guidance.

7. ILR Funding Claim 7

8. Annex E: Additional Information 8 • The Funding Claim Report reporting code takes into account: • the split in funding responsibility between EFA and Skills Funding Agency (SFA); • that the funding responsibility for learners aged 19-24 with significant ALS cost (above £5,500) needs remain with the EFA for 2012/13; • learners who started programmes aged 18 in the first year of their programme but are aged 19 or over on the 31 August 2012 are usually the funding responsibility of the SFA for 2012/13 (unless they meet the criteria set out in (b) above or (d) below. • In addition from 2012/13 the funding responsibility for 19+ continuing learners at sixth form colleges (defined in c above) is with the EFA and they are funded under the EFA funding model • 2. The ILR fields used to determine into which part of the Funding Claim Report the learner and their funded cash appear is set out in Annex E (Table E1) .

9. Annex E: Additional Informationsee page 30 9

10. Annex E: Additional Information 10 • Notes • 4. The report calculates using the codes shown in Table E1 above. The notes at the bottom of Page 1 of the LIS report help explain the report and are also explained below: • ’Section C: ALS High Value Claims figure is excluded from all totals on this page. • This page includes all learners who have learner responsive funding and are identified in the ILR as EFA funded. Any learners with ILR Field “source of funding”, the Funding Model set to 107 (16-18 learner responsive funding), but aged 19 or over on 31 August 2012 and hence coded (“source of funding” = 105) as SFA funded will not usually appear on this page but on the SFA Page of the report. • The rows labelled C include learners (“funding model” = 22) (who should be aged 19-24 on 31 August 2012) funded by the EFA at the ALR funding model rates where field “source of funding” = 107. • For 2012/13 all learners with a Section 139A Learning Difficulty Assessment must have this recorded in ILR field “Learning funding and monitoring code” so the LDA reference is recorded as 1 as this will be part of the 2012/13 funding allocation process. • The Data Service has issued full guidance on the ILR Funding Claim Report within the LIS Report Guidance, at: http://www.thedataservice.org.uk/Services/DataCollection/software/

11. Annex E: Additional Information 11 • ILR Data Recording Issues • 5. Providers are now required to update the data entry in ILR field “source of funding” and “funding model” appropriately for all continuing learners that change funding body responsibility for a later year of their programme. The ILR record at a learning aim level is for such learners different across the different funding years. • All LLDD learners aged 19-24 on 31 August 2012 and for whom the EFA has agreed funding responsibility should be coded in “source of funding” as 107. • All 19+ continuing learners (those who started programmes whilst aged 16-18) in sixth form colleges and for whom the EFA has agreed funding responsibility should be coded in “source of funding” as 107. • 8 All other learners aged 19 or over on 31 August 2012 should be coded in “source of funding” as 105.

12. Annex E: Additional Information 12 ILR Data Recording Issues 9 Providers must avoid in R04 returns incorrectly coded learners who are aged 19 or over on 31 August 2012 (and that are not agreed EFA funded 19-24 LLDD learners) as EFA funded (“source of funding” =107). These learners are not eligible to be funded by the EFA and should be included in all data and funding returns as SFA funded learners (“source of funding” =105). All such errors must be corrected before any R04 and later data returns are made to the Data Service. 10 The EFA will exclude any of these learners (under EFA internal ILR analysis) from the lagged learner numbers used for the 2012/13 allocation process.

13. Funding Reconciliation 2012/13 13 Championing Young People’s Learning

14. Tolerance Principles & VfM 14 • The EFA tolerance arrangements for Contract Providers have been agreed to recognise that minor shortfalls in learner recruitment do not incur financial penalties that are disproportionate to any financial saving providers make from such shortfalls. • Tolerance arrangements need to meet requirement to safeguard public funding, especially where it is transferring to the private sector, and obtain as much Value for Money (VfM). • It is however important that providers who significantly under deliver their allocations are identified as early in the year as possible so funding resources can be redeployed • Providers targets for each year remain their whole allocation and providers who identify tolerance limits as their targets jeopardise both their own future funding and the funding body arguments in favour of tolerance in the future. • It is important that revisions to mid-year allocation for 2012/13 (Spring/Summer 2013) are processed as early as possible to support the above principles. • In previous years the EFA has been required to return all final post-year clawback to DfE (Treasury) but in 2012/13 EFA also needs to find resources for growth for overperformance. • Providers are expected to deliver at least 100% of their allocation each year and any tolerance limits for 2012/13 may be reviewed for any contract providers who have significantly benefited from previous tolerances in order to support overperforming providers.

15. Grant Funded Providers 15 Grant funded Providers are not subject to reconciliation BUT are still required to make the necessary funding data returns. Providers are expected to deliver their allocation every year. Reference paragraph 13 (repeated below). Providers are reminded that they are still expected to deliver at least 100 per cent of their funding agreements in every funding year. The EFA will be reviewing provider performance for previous years with the intention of ensuring that provider allocations are soundly based across funding years. Providers are reminded that tolerance and non- reconciliation of EFA funding is not designed to reward persistent underperformance.

16. Contract Funded Providers 16 • Contract funded Providers ARE subject to reconciliation set out in paragraph 20: • The principles of contract provider funding adjustment and final reconciliation for 2012/13 are: • In-year payments are made on profile as is planned for the 16-18 learner responsive model; • in-year delivery of learner numbers (and thereby cash) is reviewed during the year and where delivery falls below an agreed tolerance, action is taken to adjust the profile for the remainder of the year; • all funding variances (both in terms of learner numbers and cash) are calculated by comparing each individual provider total whole year delivery (either mid-year estimate or final claim) with their final funding allocation as paid for the year; • for the purposes of all final reconciliation calculations the EFA will moderate the reconciliation cash recovery (clawback) for contract providers according to which of the criteria set out overleaf have been met; • payment of growth for overperformance, subject to a funding cap, consistent timely data returns, “affordability” and “eligibility” checks;

17. Contract Funded Providers 17 Underperformance - Paragraph 23 For providers who have not delivered at least 95% of their programme cash allocation a cash tolerance of 5% of the programme allocation will be allowed when comparing total programme cash delivered against the total cash programme allocation. In such cases all the cash not delivered below 95% of the programme funding allocation will be recovered as clawback.

18. Contract Funded Providers 18 Paragraph 24 In calculating any final clawback the EFA will adopt the principle that providers are not significantly disadvantaged at the final reconciliation process because of any reductions to in-year funding. To meet this requirement in 2012/13 the EFA will not adjust the funding allocations for in-year under delivery but will instead start recovering clawback for underperformance during the year so as not to reduce the value of the tolerance for under performance. The slides in the mid-year reconciliation section give some examples of the inter-action between mid-year estimate and final claim reconciliation.

19. 19 Mid-year funding estimates and reconciliation • Mid-year estimate (Annex B) available as a workbook from Funding Guidance webpage at: http://www.education.gov.uk/childrenandyoungpeople/youngpeople/studentsupport/funding/a00209794/fundingguidance2012to13 • mid and year-end estimates only required from contract providers • Mid-year process similar to final claim process. Providers must include an estimate of additional delivery in the second half of the year in their mid-year estimates. • out-turn data from 2011/12 split into delivery between first and second half of the year and is being notified to providers to assist them in making accurate mid-year estimates for 2012/13 • Clawback profiled from April 2013 to March 2014 so part of in-year clawback deferred to 2012/13 for providers with 2013/14 allocations and this gives providers time to increase delivery to reduce the final clawback figure

20. 20 Completing the mid-year estimate – Column D • The ILR R06 figure (from the LIS Funding Claim Report) showing funding earned at 31 January 2013 should be entered in column D. • For EFA funding learners funding is generated from their learning aim start date until their planned end date. For this reason learners enrolled on whole funding year learning aims generate all their funding from their first ILR entry. This explains why funded providers will have generated more than 50% of their funding at the mid-year date.

21. 21 Completing the mid-year (rest of year) estimate – Column E Rest of the year estimate figure (column E) should only include: • existing learners who commence new learning aims on or after 1 February 2013 (those on a funded learning aim that started before 1 February) – this will add to the funding value but does not require a learner number entry in column E; • if the SLN start date filter (for mid-year estimates only) is not set to 1 February 2013, then all learning aims on the ILR for the whole year will be included in the LIS funding claim report – the default LIS setting is “All” (shown in filter bar at top of page 1 of LIS Funding Claim Report). If “All” is shown then on Annex B no column E should be made for any existing ILR aims regardless of their start date within the year; • learners not on any funded learning aims before 1 February 2013 – this will add to both the funding value and the learner number entries in column E.

22. 22 Foundation weekly learning aim – Column E entries • For foundation weekly learning aims it is very important that the actual end date and completion status are correctly entered on the ILR before generating a LIS funding claim report. • Learners whose planned end date is before 1 February 2013 and who are continuing in learning will continue to generate funding up to their actual end date. An entry will be required in column E for any learners that are expected to continue past their planned end date.

23. Mid-year funding estimate validation 23 • Return of mid-year estimates (Annex B in February 2013) • Validation of mid-year estimates by EFA – national and territorial • Data sheet being sent to Territories to assist in their validation (February) – maybe made available to providers where mid-year estimate needs further review • Average profile of total funded activity at the mid-point for IPP for 2010/11 is 70.5% (using ILR F05 data and then re-calculating what should have been earned from a full ILR F02 data return) • All returns must be electronic and made by completing workbook available from funding guidance page on EFA website • Opportunity for providers to be targeted for early funding audit assurance if serious concerns raised about either the accuracy or content of the estimate.

24. Calculating reconciliation – underperformance 24 • Reconciliation calculation (underperformance) • Claim/Estimate (£) • - • Allocation (£) • = • Variance (£) • If performance outside tolerance range do calculation below) • + (Tolerance in reverse sign to variance) (£) • = • Revised Variance (at Full Rate) (£) • = • £ Cash recovery adjustment

25. Mid year reconciliation example A 25 Mid-year Estimate 90 Allocation 100 Variance - 10 Deduct mid-year tolerance (5%) + 5 Mid-year Adjustment (Clawback) - 5 Final Claim 94 Allocation 100 Variance - 6 Deduct final tolerance (5%) + 5 Deduct mid-year adjustment - 5 Final Adjustment (Clawback) + 4 * Any clawback calculated from mid-year estimate figures that is not then calculated from the final claim figures is refunded to providers who have increased their delivery above the mid-year estimate.

26. Mid year reconciliation example B 26 Mid-year Estimate 95 Allocation 100 Variance - 5 Deduct mid-year tolerance (5%) + 5 Mid-year Adjustment (Clawback) - 0 Final Claim 90 Allocation 100 Variance - 10 Deduct final tolerance (5%) + 5 Deduct mid-year adjustment - 0 Final Adjustment (Clawback)* - 5 * Providers whose final claims are lower than their mid-year estimates will see no advantage from the final claim calculations from over stating their mid-year estimates.

27. Mid year reconciliation example C 27 Mid-year Estimate 90 Allocation 100 Variance - 10 Deduct mid-year tolerance (5%) + 5 Mid-year Adjustment (Clawback) - 5 Final Claim 110 Allocation 100 Variance +10 Deduct final growth tolerance (3%) - 3 Repay mid-year clawback + 5 Final growth payment * + 7 * Over delivery is subject to a growth cap and an affordability check. The total final payment will include repayment of any clawback calculated at mid-year that is not calculated from the final claim figures and is refunded to providers who have increased their delivery above the mid-year estimate.

28. 28 Reconciliation - Transitional Protection (TP) and Underperformance This slide shows how TP is used in calculating funding reconciliation for underperformance for contract providers

29. 29 This slide shows the clawback payment profile that will be applied to all clawback figures for 2012/13. Providers with no future year allocations are expected to have repaid any clawback before the end of the funding year. The clawback profile for continuing providers each month uses the same proportion of the main allocation payments to minimize the impact. Clawback recovery profile for 2012/13

30. Calculating reconciliation – overperformance 30 • Claim/Estimate (£) • - • Allocation (£) • = • Variance (£) • If performance outside tolerance range do calculation below) • - (Tolerance in reverse sign to variance) (£) • = • Revised Variance (£) • = • £ Cash (growth payment*) • (* figure above also subject to a growth cap and to affordability)

31. 31 • Growth will only be considered for payment for contract providers in the following circumstances (see paragraph 29) • Contract providers must meet the deadline for the return of ILR R06, R13 and R14 returns and the deadlines for mid-year, year-end and final claims • R13 must give a materially accurate estimate of the providers final funding return (the variance between R13 and R14 to be no more than 3%) • Growth funding will only be paid after the EFA has carried out both “affordability” and “eligibility” checks as explained in paragraphs 20 and 38. • All growth payments will be after receipt of the final funding claim and ILR R14 data return with all agreed payments are expected to be paid in one instalment in January 2014. Growth payments - Rules and profile- Contract providers only

32. 32 • Paragraph 20 explains what is meant by “affordability” • For contract providers delivering 16-18 learner responsive funding their funding allocation is subject to adjustments for underperformance and overperformance in 2012/13. The EFA will use the final claim clawback to pay growth funding to over-performing providers. All final growth payments are subject to affordability and the EFA will only be able to fund over performance from any clawback from under-performing providers in accordance with this guidance Growth payments - “affordability” - Contract providers only

33. 33 Adjustments from Mid to Final Claims (Contract Providers only)

34. Examples of final reconciliation for underperformance or delivery within tolerance ranges (see Annex C) 34

35. Examples of final reconciliation for overperformance (see Annex C) 35

36. EFA Funding Guidance for Young People 2012/13 ILR Funding Returns - published June 2012 (separate presentations are also available on Funding Guidance and Learner Eligibility Guidance (LEG) EFA Funding Implementation Team (Young People)